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What banking policies need revisiting?            qualify for CRA credit. We have to stop holding banks

                    There are three policy areas that need work in the near  and business development hostage through the CRA pro-
                    term. First, the Bank Secrecy Act. Banks and federal reg- cess and we need to modernize how we think about ser-
                    ulators are getting better at catching criminals who mis- vice areas. Today, it is much too easy for a bank to earn a
                    use the banking system. One of my priorities is to make   satisfactory rating in this area and almost impossible to
                    the  process  as  effective  and  efficient  as  possible.  The   earn an outstanding rating. Let’s fix it so that banks are
                    laws and regulations around the Bank Secrecy Act and an- encouraged to help keep communities and neighborhoods
                    ti-money laundering are intended to protect our finan- vibrant and get appropriate credit for doing so. OCC rat-
                    cial system from being misused for illegal purposes. But   ings and decisions related to the CRA need to be based on
                    rather  than  serving  that  goal,  our  system  has  evolved   the actual record of how a bank meets its CRA obligations.
                    into a series of gotchas and other unhelpful activities. We
                    need a fresh approach.                            What do you see as the major challenges
                       The OCC is just one agency in the mix. It acts like   for banking in the months ahead?
                    an umpire in baseball, but the rules are written by other  The  federal  banking  system  is  safe  and  sound  today.
                    agencies. To fix the system, we will need a collective ef- The industry understands its risks better than ever, and
                    fort that involves lawmakers, the Treasury Department,  bankers have done a great job of taking on higher quali-
                    the  Financial  Crimes  Enforcement  Network  and  other  ty lending. Capital and liquidity are good. When we talk
                    regulators. Congress has begun to reexamine the Bank   about challenges, credit quality is always a driver and we
                    Secrecy Act to determine what can be improved, and I am   are seeing a pattern of weaker underwriting and addi-
                    optimistic that we can make the system work better and   tional risk accumulating at this point in the cycle. The
                    improve how we protect our financial system.      worst loans are made in the best of times. We also have
                       Second, we need to reexamine the Community Rein‑ to look closely at cybersecurity, which is front of mind
                    vestment Act (CRA). The original intent of the CRA was   for bank executives and regulators. We’ve made a lot of
                    to encourage banks to lend in their communities. I am   progress in this area, but I see opportunity to better har-
                    a big supporter of this goal and the community groups   monize regulatory effort and guidance.
                    that  provide  services  in  their  communities—but  today,   We  also  need  to  watch  the  effect  of  rising  interest
                    we have an incredibly complex process that has lost its   rates  on  the  balance  sheets  of  these  institutions  after
                    way. After 40 years, we have a CRA regime that consum-  such a long period of historic [low] interest rates.
                    er groups don’t like, banks don’t like, and, frankly, regu-
                    lators don’t like.                                What do you see as the path
                       OCC ratings and decisions related to the CRA need   forward for community banking?
                    to be based on the actual record of how a bank meets   Small, local banks remain the heart of their communi-
                    its  CRA  obligations  and  serves  the  needs  of  the  com- ties and we need to ensure that they remain part of the
                    munities it serves. We won’t tolerate groups that do not   broader banking landscape in the future. To do this, we
                    provide  services  to  these  communities  to  disrupt  the   need greater flexibility to tailor regulatory requirements
                    process  and  affect  our  decisions.  Banks  will  have  the   for community banks that do not pose the same risks as
                    independence to determine what groups and activities   their  larger  counterparts.  I  think  we’re  seeing  momen-
                    they  choose  to  partner  with  and  invest  in,  and  we  en- tum in Washington to make meaningful progress to re-
                    courage banks to ensure those investments make a dif- duce the regulatory burden on these banks.
                    ference in the communities they serve.               One way to move forward is to return to a simpler
                       The third area is small-dollar lending. The byprod- capital structure for small banks. I’ve been a banker for
                    uct of current regulation is that it’s very difficult to get   more than 30 years and I need expert help to fully un-
                    a  small-dollar  loan  at  a  bank,  and  most  of  this  activi- derstand the requirements from time to time. We should
                    ty has been forced out of banking. My goal is to bring   not put that kind of burden on smaller banks that do not
                    small-dollar loans back to banks. Banks should be part   pose a threat to our financial system.
                    of the solution and one choice for consumers who have   We also need to be mindful of the burden of regula-
                    small-dollar, short-term credit needs.            tory compliance on community banks and bring a more
                                                                      common sense approach to our assessment.
                    Do you consider the Community                        Aside  from  burdensome  regulation,  community
                    Reinvestment Act to be outdated?                  banks also need a clearer path to take advantage of busi-
                    The CRA is 40 years old and after four decades we need to  ness opportunities. For instance, there are areas of small
                    revisit whether we are still achieving our original goal of  consumer  lending  in  banking  that  should  be  thought
                    encouraging banks to meet the credit needs of their com- through  to  allow  banks  to  participate  in  that  space.
                    munities. We need to simplify and expand what activities  Banks have to understand the rules in the new technol-


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